Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 80-99)


2 MAY 2006

  Q80  Rob Marris: I am also aware from the Trade and Industry Committee visiting India in March that in a market of 1.2 billion people and a larger geographic area albeit with, I suspect, a lower density of mobile phone use, on Airtel you can get a one rupee, which is about 1.3 pence, call anywhere in India on any network. That is rather a lot less than, say, a call from Italy: £2 up to £4.

  Mr Carter: I am not defending the intra-European current price tariff, what I am saying is it is not solely a UK issue and, as a consequence, it is somewhere between a difficult and an intractable regulatory problem for us to solve without moving in concert with the rest of Europe, which is one of the reasons why you have seen the Commission come to this question because, by definition, you need some form of bilateral, ideally multilateral approach to the problem.

  Q81  Rob Marris: Why? If I am using a UK mobile phone in France calling the UK, why do I need a multilateral decision rather than, for example, Ofcom cracking down on my UK mobile phone operator charging me what I personally regard as overly high prices? Why does it need a pan-European approach? That may be more desirable but why does it need one and why can you not do anything now?

  Mr Carter: Because of the way the current framework directive works in market definitions it would be difficult—not impossible, I take your point—for us to unilaterally impose either a retail or wholesale regulatory control on a UK operator. Having said that, we have a proposal on the table from the Commission, which is being consulted on, which has multilateral dimensions. In answer to your specific question, what are we doing, we are doing two things. One, we are participating at what you would describe as the highest level of those discussions through our chairmanship of the ERG; secondly, as a consequence of that we are doing quite a substantial amount of the heavy lifting and the analysis as to what would a good regulatory solution look like. I have to say, for the record, we are not instinctively attracted to a retail price control, not least because it is a lot easier to impose them than it is to remove them, as retail price controls on fixed telephones would verify; and our preference would be either for the industry to deal with the disparity in price tariffs, which they are themselves, and there are some signs of that; and/or secondly to have a sensible workable wholesale piece of regulation which was passed through to retail prices. We would not be happy just to have a wholesale price solution where there is no benefit to the end consumer, but we think you could achieve that without necessarily having to go the whole hog to retail price controls.

  Q82  Rob Marris: I would suggest to you that that approach is a bit lily-livered. I have a Vodafone and I have just gone on to Vodafone Passport. From memory, if I am within the European Union and I am making a call it is 75 pence for the first minute. That does not suggest to me, given the state of technology and the relative cheapness of technology around the world compared with what it was 15 years ago, say, that the industry is doing a very good job of driving down prices through competition. If one accepts that—and you may not—that suggests to me that Ofcom correspondingly is not doing a very good job in stimulating the industry, either through retail price control or through discussions in driving down the prices.

  Mr Carter: I am not sure that our positions are as far apart as the transcript of this discussion might lead you to believe.

  Q83  Rob Marris: I am glad to hear it!

  Mr Carter: We do not disagree with your fundamental analysis that prices are too high; all we are really debating is what is the most effective way of getting them lower, and we are just making an observation at this stage that imposing retail price controls is quite a heavy-handed solution. I know we are not averse to doing it, we have done it in mobile call termination, I am just saying that if we could find an alternative which was a combination of a wholesale price control and an industry solution which was more competitive than the one you have described, because I will take your point that that would be a better outcome. If that does not happen it will not really matter what we think because the Commission will decide that there will be a retail price control and unless that is vetoed at the Council of Ministers then that will become the law.

  Q84  Rob Marris: With respect it does matter what you think because you have already said today that you could in fact do it unilaterally although you would find that harder to do.

  Mr Carter: We could but now the multilateral process is underway I think it makes sense for us to work within that framework.

  Q85  Rob Marris: Mobile phones and international calls—and you are more of an expert than I am—have been around for at least 10 years and probably longer; how much longer is the consumer going to have to wait given, as you have readily acknowledged in response to the Chairman, that we are a service economy, we are a trading economy and the European Union is a major trading partner? How much longer are we going to have to put up with these costs to consumers and to UK business?

  Mr Carter: I think probably less than six to eight months.

  Q86  Rob Marris: You think that the European multilateral approach will produce a result within six to eight months?

  Mr Carter: I think that either you will see a significant industry reaction or you will see a European solution.

  Q87  Rob Marris: How low do you think prices might go?

  Mr Carter: That is a little like what level should the assistance programme go. I do not think it would be appropriate for us to conjecture at this point as to what is an appropriate price plan, but we take your point that it needs to go down and we are making that very clear.

  Q88  Rob Marris: I would have to disagree with you, I am afraid; I think it would be important for you to have some idea of how low the price should go because that should inform your decision as to whether you push for some kind of RPC or an industry-led competition. You cannot judge, surely, whether the industry-led competition, if the multilateral talks go that way, is producing an adequate outcome for the consumer unless you have a yardstick by which to measure it, namely what could happen if you did it by another regulatory method, namely RPC?

  Mr Carter: And we are doing that analysis right at this point in time.

  Q89  Rob Marris: So you are in fact going to form a view on how low prices should go; you just do not have it yet to give to us today?

  Mr Carter: Correct. We are working with the Commission on their consultation at this point in time.

  Chairman: My colleagues might have some supplementary questions on this specific area of questioning.

  Q90  Mr Bone: At the beginning of that exchange I thought you said that there was an EU directive stopping you doing this, but I just wanted to know whether that is yes or no?

  Mr Carter: No, if that is the way it came across I apologise. What I said was the framework directive, which is the legal framework for the way in which all telecommunications regulations is conducted, makes for some complexities in making unilateral decisions in markets where, in this instance, the receiving party or the calling party is in a different geography. The current proposal from the Commission is to come up with the regulatory solution that exists outwith the framework directive, so it will be a stand alone unilateral decision on the question of international roaming prices. Part of the reason why the Commission have reached for that solution is because they recognise that the framework directive does not naturally lend itself to markets that work in different geographies—that is the point I was trying to make, clumsily.

  Q91  Mr Bone: I think a lot of people in this country think that making a telephone call from Europe back home is a rip-off at the moment and some people would say that you are showing some complacency on this matter and waiting for the European Union to act when many people would look to you to act quicker?

  Lord Currie: I think they are right to look to us but I think it is also right that this should be an issue tackled at a European level. The interconnections of networks and systems are such that a unilateral solution I suspect would have unintended consequences that would cause difficulty. A European-wide approach to this makes every sense and, as Stephen has said, we are working very hard to bring such a solution about.

  Q92  Mrs Curtis-Thomas: It does not make much sense to me actually, given that there are already facilities, such as the Vodaphone system, to reduce call charges, why we have to wait and take a European lead on this. My question is, if I wanted to know what the call charges are for each phone provider at this specific time so that I can compare and contrast those in order to get the best deals for myself where is the independent advice containing that information available for me to access?

  Mr Carter: I think that there is only one single provider, uSwitch.

  Q93  Mrs Curtis-Thomas: No, it does not actually; it covers domestic telephone lines, it does not cover mobile. I have looked, gentlemen, and I cannot find any independent advice at all, which is why we may have only four million users for 3G because I suspect quite a number of people would like to go on to 3G but the cacophony of noise surrounding rates, tariffs, incentives is so great I think it is substantially confusing the marketplace and undermining the public's confidence. So what are you going to do about that?

  Mr Carter: I am not sure that I would agree with your contention that there is a lack of consumer confidence in the mobile market per se, but in answer to your specific question about provision of independent data, that is not something that we do, for a whole host of reasons not least it would be almost undo-able because, as you have rightly observed, the prices and the market change and the tariff structures change on an almost daily basis. The reason why they do that is because there are multiple providers and the reason why there are multiple providers is because there are millions of people choosing these new services on a daily basis. So, ironically, because it is such a competitive market—we have five operators and seven virtual operators—there are multiple choices. I accept the point that that makes it a difficult market through which to navigate, I do take that point, but I am not sure it is the case that there is a lack of confidence in the market.

  Q94  Mrs Curtis-Thomas: My colleague has just said that people feel ripped-off by mobile phone providers and I think they do and I think they have a right to feel that, but when they try and navigate their way from where they are to a preferred position the information presented to them is such that they do not know when they are better off. There has been an acknowledgment by other regulators that there should be some clarity in the market, even though there may be market changes. I grant that this is a challenging area but given the level of usage and the current level of demand surely there must be an incentive to provide some very clear information for the consumer? I have checked uSwitch, I have checked all the other providers; they manage to do it, they manage to give people a portfolio of costs for their particular usage, so why not in mobile phones?

  Mr Carter: I do not think it would be appropriate for us to answer for every mobile provider what they do or do not do.

  Q95  Mrs Curtis-Thomas: Forgive me, but is your job not to ensure that people like me do not get ripped-off? Is that not your job? I am not just talking on behalf of myself.

  Mr Carter: Is your rip-off observation a general statement about mobile charges or specific to international roaming? I thought the gentleman's previous comments were in relation to international roaming charges?

  Q96  Mrs Curtis-Thomas: Yes, in fact specifically for international mobile charges.

  Mr Carter: And we would agree with that, which is why we are pursuing a solution on international roaming as we speak.

  Q97  Mrs Curtis-Thomas: Forgive me, but if you look into my constituents I represent some of the poorest people in the UK today and they do not have an option of a landline they have an option of a mobile telephone, and I am trying to ensure that they get the best deal possible for that particular provider and at this time when I write to them I can say, "You can go to these places to get a best deal, except in one of the most important areas you cannot, you are stuck with whatever your ability to rationalise the different prices will give you." I think something needs to be done in this area; I think you have a duty to do something in this area.

  Mr Carter: Perhaps we should have a specific conversation either separately or in writing about what exactly it is you would like us to do and if we can do it we will do it.

  Q98  Mrs Curtis-Thomas: I would like to see mobile telephony going on to uSwitch so that people can do a comparative analysis on tariffs.

  Mr Carter: uSwitch is a commercial organisation and I am sure if you had that conversation with uSwitch they would entertain that.

  Lord Currie: Could we write to you on this specific question because it is clearly an important one?

  Mrs Curtis-Thomas: Yes, you can.

  Q99  Mr Evans: Who do you think is to blame for the high international roaming charges?

  Mr Carter: Who is to blame? I am not sure that we are in a position to allocate blame. I think that all operators in all countries are currently charging higher prices because each of the geographies have different peculiarities—the market structures are different. But it is undoubtedly the case—and whilst I sense the ire around the table we do not disagree with any of the points being made and we are dealing with them, I would have to say at some speed—that for many millions of people, including myself, I did not pay for this handset. We had a conversation earlier about the price of set-top boxes where the gentleman there was rightly saying that a free Sat box costs around £100. A mobile phone handset costs considerably more than £100 but we get it for free and one of the ways in which I get it for free is because there is a cost subsidy from call charges. So there are structural issues in the market which are also relevant issues to understand—they do not excuse the pricing—and one of the things we are doing in the analysis of the market is to work out where those cost subsidies exist, where they are legitimate and where they are not, and then I am extremely confident that by the end of this calendar year you will see some significant reductions in those prices.

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